The electric vehicle manufacturer Tesla (NASDAQ: TSLA) surged higher for the third day in a row. The Elon Musk lead company remains a focus after the market’s recent pullback. While tech-stock traders are hunting for entry points in TSLA stock, other investors are looking long-term at the potential of the EV industry as a whole.
Not only this, but renewable, green energy has become even more relevant as global economies look to build climate-friendly infrastructure. It all starts with raw materials and, with that, mining stocks.
What Are Energy Metals?
Let’s look at some of the fundamentals of energy metal mining companies before we dive in. What are energy metals anyway? These are raw materials needed for building the infrastructure necessary to host renewable energy transfer. Nickel, cobalt, and lithium are among the most prominent. However, you also can’t ignore metals like copper, magnesium, iron, manganese, graphite, and aluminum. These are critical in EV battery production and valuable to the supply chain, in general.
Companies like Tesla have set the tone for the future of renewable energy. In its latest update, the company highlighted its record-setting delivery figures. Production reached more than 305,000 vehicles in the fourth quarter, and deliveries came in at over 308,000 vehicles.
In 2021, Tesla delivered over 936,000 vehicles total, with the Model 3/Y boasting most of that amount. With the industry expected to continue growing globally, demand for raw materials is likely to move in tandem. Today we look at some of the mining stocks to watch as energy metals demand picks up.
Mining Stocks To Watch
Freeport-McMoRan (NYSE: FCX)
FCX stock has been hot since we began reporting on it at the end of December. Shares reached new highs not seen since last May, and speculation is likely playing its role right now without much news to speak of. EV excitement has captivated traders and stock market headlines this week, thanks to companies like Rivian, Tesla, Nio, and others. Freeport is a major producer of copper and one of the hallmarks of not only the EV industry but also general industrials.
The company produces more than 1 billion pounds of copper annually in the US. In its last quarterly report, the company also said that the market outlook for the metal is “extraordinarily positive.” Freeport also announced an up to $3 billion share repurchase program and declared quarterly dividends for 2022 of $0.15 per share. “With the recent achievement of our net debt target, strong execution of operating plans, and favorable market conditions for our products, we are pleased to commence implementation of our performance-based payout framework,” said Chairman and Chief Executive Officer Richard Adkerson in comments back in November.
Other factors at play include the trading outlook on 2022 when it comes to FCX. CNBC contributor Pete Najarian, famous for his options trading, called Freeport a “CNBC Stock Summit Pick” for 2022. Bryn Talkington of Requisite Capital Management also picked the stock, saying that copper is “probably the most important component in the electrification of the global grid.”
FCX could be one of the top mining stocks to watch this year with this backdrop.
MP Materials Corp. (NYSE: MP)
MP is another one of the hot stocks to watch right now. As far as energy metals go, the company focuses on neodymium-praseodymium oxide. This is a significant ingredient in high-strength magnets. Where would these be used? High-strength magnets are used in many different applications. For electric vehicles specifically, you may find them in motors, pumps, power mirrors and seats, drivetrains, and even steering wheels.
MP recently signed a new deal for an EV project. No, it wasn’t with Tesla, but it was with one of the largest vehicles manufacturers on the planet, General Motors (NYSE: GM). MP inked a deal to build a U.S. magnet factory and enter a long-term agreement. MP will supply U.S.-sourced and manufactured rare earth alloy and magnets for powering more than a dozen models. These models will also use the GM Ultium battery platform.
MP Materials Chairman & CEO James Litinsky, in a December 9 press release, said, “This is a momentous occasion for the reshoring of the American supply chain, and we are grateful for GM’s confidence, commitment, and leadership.”
In light of the pending EV boom, MP stock could also be another one to watch in 2022.
Vale S.A. (NYSE: VALE)
Another mammoth mining company, Vale, has a broad portfolio of mining projects worldwide. In particular, its copper mining operations in Brazil and Canada have come into focus as the EV trend emerges. In a recent update, Vale said it expects to produce 75,000 – 80,000 t of copper during the 4th quarter. That would bring yearly production into a range of 295k-300k tons of the year. Additionally, copper production over 2023-2026 is expected to come in between 390-420 kt and is anticipated to trend above 450 kt after that.
In addition to copper, Vale’s nickel operations have also come into focus with this EV trend. It’s one of the world’s largest nickel producers, with projects in Brazil, Canada, and Indonesia. It also helps that Vale is Tesla’s leading nickel supplier. Recent comments from CEO Eduardo Bartolomeo suggest Vale is looking to expand its supply partnerships. “We think we can be the supplier choice,” he told Financial Times in December 2021. “We are talking to Ford, GM, we are talking to all of them.”
With projects in over 30 countries, the company’s history has more or less forced its evolution beyond mining alone. Vale also participates in logistics, infrastructure development, energy, and even steel making.
Mining Stocks To Watch This Year
Electric vehicles are one aspect of the renewable energy/green energy movement. Yet they are a substantial one, especially for raw material demand. With this trend likely to continue and the potential of more EV growth to persist in the foreseeable future, mining stocks may be one of the more popular ways to play the trend.
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